Traditionally, when one or more tax-exempt bonds is issued (e.g., by a municipal issuer), the bond proceeds associated therewith are typically yield restricted monies. Thus, in order to maintain the tax-exempt status of such bonds, any yield on the bond proceeds greater than the bond yield itself must generally be turned over to the Federal government.
Also, in the financial field, a pair of instruments designed to create a fixed rate liability by combining two variable rate components has been utilized to issue debt. For example, bonds have been issued as “INFLOS” (a proprietary financial mechanism designed to create a fixed rate liability by combining two variable rate components). Of note, if a traditional fixed rate bond would bear interest at 5.20%, for example, the interrelated pair of financial instruments might bear a fixed rate of 5.10% (the difference being designed to give an incentive to utilize the interrelated pair structure).
Nevertheless, it is believed that no conventional mechanism exists for structuring a bond issue (i.e., a tax-exempt bond issue) to achieve unrestricted earnings on at least a portion of bond proceeds by investing in an inverse-floater, as provided for by the present invention.
Among those benefits and improvements that have been disclosed, other objects and advantages of this invention will become apparent from the following description taken in conjunction with the accompanying figures. The figures constitute a part of this specification and include illustrative embodiments of the instant invention and illustrate various objects and features thereof.